Buying a home
Pre-approval tells you how much a lender is prepared to lend before you find a house. Here’s how it works, what you need, and the conditions that catch people out.
By Yatin Kainth, Financial Adviser. Last reviewed
Mortgage pre-approval is a lender’s conditional agreement to lend you up to a set amount, based on your income, expenses, debts and deposit. It usually lasts a few months, often around 90 days, and it isn’t a guarantee: the lender still has to approve the actual property before your loan is final.
When you apply, the lender checks your income, living costs, debts, credit history and deposit, then tells you the most it will lend and on what terms. That letter lets you shop with a real budget and make offers with more confidence.
What it doesn’t do is approve a particular house. Once you’ve found one, the lender looks at the property itself: its value, its condition and sometimes its title. The loan only becomes unconditional after that step.
| Pre-approval | Full (unconditional) approval | |
|---|---|---|
| What’s assessed | You: income, expenses, debts, credit, deposit | You and the specific property |
| When | Before you house hunt | After your offer is accepted, or before an auction |
| Typical conditions | Valuation, building report, no change in your circumstances | Conditions satisfied, loan documents issued |
| Can it fall over? | Yes, if the property or your situation doesn’t stack up | Rarely, unless something material changes before settlement |
Banks look at credit card limits, not balances, so closing cards you don’t use can lift what you’re able to borrow. See how credit cards and car loans affect borrowing.
At auction there are no conditions, so you need the lender to sign off on the specific property before bidding. Read auction, tender or multi-offer for how that works.
Each lender’s credit check is recorded as an enquiry. A few enquiries close together can make you look like you’re shopping around because you’ve been declined. Going through an adviser helps, because I can check which lender is likely to say yes before you apply.
It depends on the lender, but it’s often around three months. If it runs out before you buy, you can usually apply to renew it, and the lender will reassess you against its current policy.
No. It’s conditional. The lender still has to be happy with the property you choose and with your situation at the time you buy.
You can, but each application adds a credit enquiry. It’s usually better to work out which lender suits you first and apply there.
That depends on your income, expenses, debts and deposit. The borrowing calculator gives you a rough range before you apply.